V. Material Benefits of Microfinancing

Microfinance initiatives can play an effective role in addressing material poverty, the physical deprivation of goods, services, and the income to attain them. MFIs can help people become more economically secure. This, in turn, has a multiplier effect on people's standard of living, enhancing basic household welfare, such as food security, nutrition, shelter, sanitation, health and education services. MFIs can help prevent and extricate people from debt.

Oftentimes, they liberate low-income households from moneylenders with outrageous interest rates that often reach 100% annually. Savings and credit services help people start or improve their own small businesses, providing income generation and employment for themselves and their families.

Credit can be used as working capital so that clients' efforts become more productive; for example, clients can buy rice or grains in bulk at wholesale prices and resell it at retail prices or buy a refrigerator to keep produce fresh. As clients become more productive, their income increases and they are able to accumulate savings for other investments and emergencies.

Savings serve as reserves for important household expenditures (such as school fees and funeral costs), and as insurance against sudden crises (such as illness, natural disaster, or theft) that can otherwise result in destitution for people already living at the poverty line. In many cases lowincome people want to save, and have been saving in a variety of traditional ways, ranging from kinship networks to Revolving Savings and Credit Associations (ROSCAs), but lack appropriate saving facilities that offer a combination of security of funds, liquidity, positive real return, and convenience. MFIs can build upon Africa's traditional savings ethic to enhance outreach and quality of services. It is important to keep in mind that for any financial service to have a lasting impact on poverty eradication, it must be flexible and innovative to adapt to their needs of its clients.

Microfinance in Africa: Combining the Best Practices of Traditional and Modern Microfinance Approaches towards Poverty Eradication To learn more about this author, visit United Nations Economic Commission for Africa's Website.

Like this article? Share it with your friends

E-Mail | Print | More

Related Articles
IV. Module II: Linking Microfinance to Poverty Eradication
	There is a fundamental linkage between microfinance and poverty eradication in that the latter depends on the poor gaining access to, and control over, economically productive resources, which includes financial r...
IV. Introduction - MICROFINANCE IN AFRICA: THE MODEL
	The last twenty years have seen significant advances in understanding and providing financial services to better advance development and eradicate poverty. This includes providing the financial means to save, acce...
I. WHAT CAN MICROFINANCE DO FOR AFRICA?
	When properly harnessed, microfinance offers a variety of benefits to the African people. Foremost, microfinance initiatives can effectively address material poverty, the physical deprivation of goods, services, a...
Developing Passive Income
	Passive income is crucial to growing your business in a way that is not dependent on your time input. Passive income is income that comes without you directly having to work for it on an ongoing basis.
E-newsletters: why they're good for business
	Have you ever thought about sending out your own newsletter to promote your business? Well, Helen Dowling from Exceptional Thinking (www.exceptionalthinking.co.uk) shows you why they're good for business and how to ...

---

Related Forum Posts
	Top 10 Reasons Patent Holders Fail
	Irritants
	New Woman Entrepreneur Profile
	Seek Venture Capital & Funding
	Internet Franchise!
	Software products
	Ladies Who Launch speakers - Detroit, Toronto, New York, etc
	Non Commercial Food Service Handbook

---

Related Businesses - Evan Elite Authors

The Evan Elite Authors program is currently in beta phase. For details please contact us.